By: Peter Altmann, Vice President, Mobility and Travel Protection, Hospitality, Amadeus
The car rental industry is in the midst of a remarkable technological shift that is driving the future of transportation. For travelers, this means mobility is quickly becoming more personalized, catered, interconnected, and sustainable. For cities, it could mean less traffic and less space reserved for parking. And for car rental companies and manufacturers, this may be a time of great opportunity and innovation, or one of great disruption.
Here’s a look at the traveler trends inspiring this shift in mobility, the main challenges ahead, and technological trends that innovative car rental companies should keep in mind as they grow their businesses in the years to come.
Traveler expectations are adapting to a warming, post-pandemic world
With the travel industry well on its way to recovery, it’s become clear that the travelers of 2023 have different expectations than those of 2019, with technology deeply rooted in our everyday lives. People are now used to having personalized products and services on-demand and just one click away.
A new Amadeus paper, Catalysts for Change: Building the Hospitality Ecosystem of the Future, investigated what’s topping traveler wish lists now. The research found that personalization, flexibility, sustainability and having more modern digital tools to remove the friction from travel were all high priorities.
That’s not the only shift we are living through; the past eight years have been the hottest on record, so it’s no wonder that sustainability is also top of mind. For mobility companies, that means a marked interest in electric vehicles and car sharing programs that allow consumers to rent or share rather than own vehicles. In Catalysts for Change, experts said that mobility providers will need to prioritize digital experiences, multimodality, sustainability, ride hailing services, and safety to stay ahead of these shifting traveler expectations.
But how can technology help? A report by Amadeus and Microsoft, Ahead of the Curve: how technology is driving the future of the rental car industry, identified five trends that could help innovative car rental companies adapt to these traveler priorities, to keep them at the center of everything that they do.
1. The rise of strategic alliances & agile competition
Hertz and Tesla. Uber and BMW. Turo and Michelin. Transportation companies are partnering up with sometimes unexpected brands to offer better service and more convenience, and to take advantage of customer loyalty across brands. Business models are also shifting the emphasis from hardware to software, and from product-centric approaches to service- and customer-centric strategies.
As with restaurants and retailers, service and convenience are top of mind for people looking to rent a car, and in some places, traditional car rental companies are no longer the only game in town. For example, Turo gives customers transparency about cars available by location, and allows people to rent cars directly from their owners. Kyte will deliver cars directly to a traveler’s doorstep, and Lynk & Co allows people to subscribe to cars month-to-month. Light on assets and customer friendly, these car rental businesses are in direct competition with traditional car rental companies.
2. Autonomous vehicles are in our near future
Partnerships between car companies and autonomous vehicle firms are likely to bear fruit as early as 2030. In 2022, Uber announced partnerships with Aurora, Motional, and Nuro. Meanwhile, car manufacturers General Motors (GM) and Cruise partnered with Microsoft to make use of the Azure cloud platform for data storage, artificial intelligence and machine learning capabilities. GM Chair and CEO, Mary Barra envisions a world with zero crashes, zero emissions, and zero congestion. Once these hit the road, the world of owning and renting a vehicle will have fundamentally shifted. Not all travelers like to drive, especially when they are visiting a foreign country; autonomous vehicles could offer an opportunity to car rental companies as well.
3. Car manufacturers are becoming software providers
Original Equipment Manufacturers (OEM) used to sell consumers a car once every few years and then disappear from top of mind. OEM leaders realize that to protect the traditional business of selling cars, they must reach customers in new ways. Some, like Polestar, a Swedish Electric Vehicle (EV) brand, are partnering with established rental companies, like Hertz, to deliver more than 65,000 EVs over five years. Others are shifting from hardware-driven relationships to software-driven customer experiences: when a car is purchased, the owner also purchases a subscription so that their vehicle’s operating system is automatically updated. This shift could have repercussions on traditional car rental businesses.
4. MaaS connectivity democratizes transportation
Mobility-as-a-Service (MaaS) is revolutionizing the way people access transportation options. MaaS gives travelers choice and freedom to use many kinds of transportation streamlined into a single, on-demand service, often accessed from their smartphone. For example, platforms like Whim and Instant System integrate public transportation, ride-hailing, car-sharing, and bike-sharing services all on one platform or app. Users can then compare transportation costs and options when they plan a trip across the city. MaaS options are bound to grow, especially as cities aim to reduce traffic and encourage sustainable transportation.
5. Big data delivers on personalization
Data-driven insights and business intelligence technology are becoming crucial for rental car companies that want to keep travelers at the center of everything that they do. For example, the car rental company SIXT envisions a scenario where travelers can save their seat position and radio preferences ahead of time, so that their car is just right each time they rent a new vehicle.
In addition, partnerships with technology companies and data sharing initiatives, like those facilitated by Amadeus, enhance the rental car industry’s ability to forecast travel patterns and improve overall performance.
The future of mobility is an exciting one; the market share of car rental companies is growing, but so has the competition. More people are ditching their cars to prioritize sustainability, but new players in the market are offering them more options than ever before. Ride sharing, ride hailing, and MaaS will continue to challenge traditional car rental models to step it up with more personalized and flexible car rental options. Not only are these transportation alternatives often less expensive and more eco-friendly than renting a car, but they’re also disrupting the established marketplace with fresh ideas and advanced technology.
As the car rental industry navigates this shift in technology and traveler expectations, embracing these five trends will become essential to remaining competitive in the years to come. Data will help car rental companies anticipate market trends. That’s why Amadeus is partnering with Microsoft to develop technologies that will support the industry so that it not only survives but thrives.
To learn more about the trends driving the future of transportation and mobility, take a deep dive into our latest paper: Ahead of the curve— how technology is driving the future of the rental car industry.